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Edited version of your written advice
Authorisation Number: 1012888885541
Date of advice: 2 October 2015
Ruling
Subject: Whether a Government grant is assessable income
A payment or other benefit received by a taxpayer is included in their assessable income if it is income according to ordinary concepts.
Section 6-5 states, in part:
6-5(1) Your assessable income includes income according to ordinary concepts, which is called ordinary income.
6-5(2) If you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
6-5(3) If you are a foreign resident your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year.
Although the expression 'income according to ordinary concepts' is not defined in the ITAA 1997, there is a substantial body of case law from which a number of factors have been drawn to determine whether an amount has the character of income according to ordinary concepts.
ATO policy concerning government payments to industry is set out in Taxation Ruling TR 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business (TR 2006/3).
At paragraph 84, it provides that ordinary income generally falls within three categories:
• Income from providing personal services,
• Income from property, or
• Income from carrying on a business.
Paragraph 83 of TR 2006/3 states a Government Payment to Industry (GPI) received by an entity to assist it to continue its existing business will be ordinary income of the recipient, assessable under section 6-5 or a bounty or subsidy received in relation to carrying on a business and assessable under section 15-10 except where the payment is for agreeing to give up or sell part of the profit yielding structure if the GPI is not assessable under any of these provisions, the recipient will need to consider whether there are CGT consequences.
In your case you received a GPI from an Australian State Government to assist you whilst you are writing and researching for a specific project. You have an ABN therefore you are running an enterprise. An enterprise is an activity, or series of activities, done in the form of a business, consequently the GPI you received is considered income according to ordinary concepts. Therefore the GPI is assessable under section 6-5 of the ITAA 1997.